August 7, 2018
Posted 9:15 AM ET - The market is climbing a wall of worry and strong earnings are overpowering all of the issues I've been outlining the last few days. The S&P 500 and the NASDAQ 100 are on the verge of breaking out. Trading volume is light and so is the news. That backdrop favors the current momentum. Swing traders should take half a position in the SPY today. Earnings season is starting to wind down and the results have been excellent. Companies don't know if tariffs will be imposed and there have not been many warnings. When the policies are implemented the guidance will change. Until then, valuations are reasonable at a forward P/E of 16. Higher interest rates, a trade war with China and a possible government shutdown have not dampened spirits. These issues will weigh on the market in September. I still believe that Asset Managers and individual investors are under allocated. Mutual fund outflows were the highest we've seen in a couple of years during the month of June ($22B). The recent rally has come on light volume and that reflects a low level of commitment. If the market breakout gains traction we will see FOMO (fear of missing out) buying. My bullish bias was tamed by the muted reaction to mega cap tech earnings. These stocks typically boost optimism and they fuel the rally. Damage from FB, NFLX, TWTR and INTC has been shoulder and these stocks have regained their footing. Swing traders should buy a half a position in the SPY on the open this morning. We will use a fairly wide stop of $280 on an intraday basis. The S&P 500 is on the verge of breaking out to a new all-time high. Day traders should use the first hour range as a guide. Favor the long side and watch key resistance levels at SPY $286.60 and QQQ $182.80. Those are all-time highs. This is a light volume environment so I would start out slow today. If the market is able to rally above the first hour high you can get a little more aggressive with your longs. If the SPY or the QQQ rally above the all-time high you can size up and hold some of your positions overnight. The news is light and so was the volume. Momentum will float us higher and a breakout is likely to attract latecomers. I still consider this a low probability environment and that is why I am only willing to take half of a swing position today. . .
Daily Bulletin Continues...
Want Full Access?
Become a MemberStart Free Trial
No credit card required.